Thursday, September 06, 2012

Markets in Everything: On-Demand Ridesharing

From today's San Francisco Chronicle, an article about how social media, smart-phone technology and "on-demand ridesharing" is challenging the city's taxi cartel:

The taxi business in San Francisco is famously fractious. "It's like a car crash - you can't look away," says Hansu Kim, owner of DeSoto Cab Co. Drivers and cab companies bicker, freelance town cars poach fares, and there are not enough cabs on the street.That's how it has been for years, which is why it's been easy for some savvy startups to jump into the market. They've
invented smartphone apps that combine ride sharing, social media and
(in one case) pink mustaches to capture a trendy new way to get around
town. Suddenly, a taxi looks old, dated and sadly unhip.

The startups - SideCar, Lyft, Uber, RelayRides and Getaround - let
riders pay with a preloaded credit, request a ride with a click of a
smartphone and track it in real time on a Google map. It's far
more efficient than calling a switchboard, talking to a surly dispatcher
and standing on the corner at 2 a.m. wondering whether a cab would
show up.

"We are offering a more enjoyable alternative," said John Zimmer,
co-founder of Lyft, which uses cars with pink mustaches. "We offer a
marginally less-expensive experience with extreme convenience and
personality experience."

The popularity of these companies is forcing taxi folks to realize they need to make changes. "The industry is spoiled," said Kim. "Many of the ills have been self-inflicted."

this is like opentable for rides. once you start using it, the notion of calling and sitting on hold to get a cab becomes absurd.

someone will figure out how to do a meta ap and become the travelocity of ride sharing, the market will get deep and if they can implement better demand based pricing with easier provider entry (as lyft is doing) you could wind up with a very responsive system that finally has enough cars on halloween and nye.

this is going to be a massive success story if it is not regulated out of existence. as this takes a bigger and bigger bite out of the cab revenues, the cartel will respond and try to get these services banned.

the sf MTA and california PUC have already come after them (unsuccessfully so far). i hope uber etc can stay ahead of the regulators. it's a game changing service.

My first thought was I'm not sure I just want to pop into a car and trust my life to some dodgy new start-up where I have no clue about the due diligence the driver may or may not have been through.

But then again, when have I ever studied a taxi drivers license displayed in the back seat? Only to confirm the face matches the driver - and even then, there have been times in Chicago where I swear they do not even come close.

Uber has been accused in several jurisdictions of illegal taxicab operation.

In May 2011, Uber received a cease-and-desist letter from San Francisco's Metro Transit Authority, claiming that it was operating an unlicensed taxi service, and another legal demand from the California Public Utilities Commission that it was operating an unlicensed limousine dispatch. Both claimed criminal violations and demanded that the company cease operations. In response the company, among other things, changed its name from UberCab to Uber.[14]

In January 2012, an Uber driver's cab was impounded as part of a sting by the Washington D.C. taxicab commission. The commissioner said the company was operating an unlicensed taxicab service in the city.[15] Following a social media campaign by Uber's users, the D.C. City Council voted in July to formally legalize this type of service, with no minimum fare.[16]

On August 1, 2012, the Massachusetts Division of Standards issued a cease and desist letter to Uber, on the grounds that the GPS-based smartphone app was not a certified measurement device. But on August 15, the agency reversed its ruling after prodding by Governor Deval Patrick, saying that technique was satisfactory because it was under study by the National Institute of Standards and Technology

they are going to take all kinds of heat from vested interests, but so far have been doing much better than i would have suspected in combatting them.

lyft is particularly sneaky. it's a "donation" for "ride sharing". they set it up in such a way as to make it push all the eco buttons but not really look like a business. you're not paying a cab, you're chipping in for a shared ride. not sure how well that will hold up, but it's an interesting idea.

it's a better car, a better service, and a more predictable pick up time with rates negotiated in advance.

why shouldn't it be more expensive?

that's like saying the sweet spot for Cadillac sales is going to be lower than a honda but above a kia.

i do not think you understand this market. maybe you need to live somewhere with expensive, unreliable cabs and try the ap based services a few times.

the real boom will come when the meta aps proliferate to let you see all available cars from each service and compare prices and the whole network moves to adaptive pricing to encourage more drivers to work during peak periods.

re: " so suddenly, these "undeserved" folks will have the money for car services?"

if the govt is spending $50 to transport someone.. would you support a more efficient model - based somewhat on the Uber model - i.e. smartphone based fleet of on-call para-transit rather than fixed route, fixed schedule models?

these transit vans cost 80-150K and their operating costs including the salary for the driver are extraordinarily costly but as I said earlier - virtually every small town in the US has some version of it to serve the low-income and other so-called "under-served" demographics.

I just see the on-call smartphone approach as potentially viable for more than just uber-type services.

after all.. why limit one's thinking?

nothing ventured. nothing gained.

you could combine it with pea pod type services.. or perhaps even package delivery type services.

first off, i do not thing "public transport" ought to be run by the government. it should all be private.

second, you are making a raft of assumptions based on no facts.

you have no idea what the cost comparison is.

$150k transit vans? i doubt that. a ford "transit van" is $24k.

and you really think that there are going to be enough private para vans to handle peak load? no way. it would not pay for itself except at very high rates.

worse, we're back to your top down thinking.

this is a really easy thing to get right.

take the government out, let people offer competing services and let customers decide what price/performance they prefer. that company will prosper, others will fail, and you get the right answer without any bureaucrat needing to guess or get involved.

i know you see it as more desirable. it's your jump to "more viable" that makes no sense.

running a set route every hour is easier than having capacity on call all the time. you clearly have no idea how utilization rates affect fixed cost businesses.

this issue is vastly more complex that you seem to think it is. you do not even seem to grasp the basics of how costs work in a business model.

you've probably seen 20 business plans in your whole life larry. i see that weekly. i work through this every day. you are totally missing all the salients here.

you are also thinking about the whole provisioning issue the wrong way. you seem to want to think "what government service should we provide?"

as a result, you miss that fact that we do not need government here.

all you need is to open the market and let businesses vy for customers. if you really must subsidize it, do it in cash grants to the handicapped, not to companies.

if you ever go into business lar, be sure to let me know. i'd love to watch that.

1. - fixed routes2. - inconvenient, and in smaller systems, long headway times3. - expensive in terms of equipment like wheelchair accessibility and capacity that seldom gets used but needs to be there by law.

Our local transit providers also provide special handicap-accessible vans to the designated disadvantaged population - which is also expensive and a bit redundant.

The local transit providers have said that it's almost cheaper to provide taxi service to people given the costs per rider.

My thinking was that most people do not need handicap-accessible equipment and can do just fine with a car and that if they could get point A to point B service at times convenient to them - that it might be a win-win in terms of costs per rider.

In other words - for the typical population - if some form of transportation that offered more immediate service on a point A to point B Ad Hoc basis - it has the potential to actually save money and people who currently pay 50 or 75 cents a trip might be willing to pay more if it actually saved them time and money over regular fixed schedule, fixed route service.

It's not solely a business-only perspective, I admit that.

But if we can get beyond the typical unrealistic libertarian perspective here and think about how to provide a service for less money ..then that's where I am on the issue.

the potential of dynamic transit via smartphone is far more than taxi/limo service, IMHO.

Well - maybe just a few highlights. Not enough time for a thorough analysis.

1. Morganovich has thoughtfully taken the time to explain in some detail why your idea can't be cheaper than existing modes of transportation. There was no libertarian or other political perspective involved, but only a business perspective.

2. Barring government barriers to entry something would already exist unless you actually believe you're the first person to consider such an idea.

3. You are describing what is basically a taxi service that excludes the handicapped. Good luck with that one. I thought you were in favor of forcing every business to accommodate the handicapped? What changed?

"Larry's Rideshare - no handicapped allowed."

As an entrepreneur and innovator you would be writing in the 1st person, as in "This is a great idea that I should be developing."

But instead, as a statist and collectivist, you are writing in the second person as in "Somebody should try this because I think it's a great idea.

Morg specifically said he did not think govt should be offering transit service to start with.

Since many businesses support transit, then this is not a pure business perspective but much more an anti-govt perspective since most governments around the world do provide transit.

re: not the first to think of

for something other than taxi or limo - can you show me other "thinking" on this. I do not claim to be the first but from what I understand, the idea of using smartphone type apps for transit in a new thing.

re: handicap.

I totally support it but having every single vehicle equipped with it because it is running a fixed schedule on a fixed route - is not the only way and certainly not the most efficient way to provide handi-cap accessible service.

For instance, have you considered how the handicap person actually gets to the transit pick-up point?

if you don't live nearby ... so lots of folks who are handicapped cannot actually use transit the way it currently operates.

But I love the way you neanderthal knuckle-draggers think about these things.

"Morg specifically said he did not think govt should be offering transit service to start with."

And he's right about that. But, his explanation of why you can't provide door to door service cheaper than existing taxis was a business case with no ideology involved. If it could be done it would be done already. You aren't likely the first one off the starting blocks when it comes to new ideas.

"Since many businesses support transit then this is not a pure business perspective..."

What does that even mean?

"...but much more an anti-govt perspective since most governments around the world do provide transit."

"Everybody is doing it" isn't a valid argument. You need to justify why it should be done at all by government instead of private companies.

"for something other than taxi or limo - can you show me other "thinking" on this. I do not claim to be the first but from what I understand, the idea of using smartphone type apps for transit in a new thing."

You have already discussed several new alternate systems like Uber and they aren't cheaper than taxis just better. You keep arguing that such systems should be cheaper despite explanations of why they're not. What is it with you? Let it sink in, Larry.

Most, if not all industrialized countries in the world are also elected governance and virtually all of those countries voters favor transit systems in most cities.

It appears to me that the libertarian options are mostly 3rd world countries where they might be able to convince a dictator to adopt libertarian policies.

That seems to be the best option for those that are vociferously opposed to public transit.

What I favor, is public transit with handi-capped accommodations but done as efficiently as feasible including adopting technologies that would allow more flexible options for mobility - to include jitney's, etc.

but I'll go along with what most voters want... that nasty old majority-rules stuff..